I think it will be a hit with the younger consumers looking for stylish & modern yet cost effective furniture solutions. The range of accessories for the home is also amazing like candles, rugs, mats, towels etc.

The fact that IKEA is making a move into India with a strong investment, is very laudable. However, I am concerned about the local sourcing commitment from IKEA. India should not become another conduit for cheap China made goods. IKEA should make an effort to involve Indian small manufacturers, craftsmen, artisan and adapt the sold goods with an Indian flavor. This makes sense. India can in the long run be an alternative to the Communist controlled China market. Most of the items sold by IKEA are not some super duper complex items, Indian manufacturing can easily adapt and produce better/cheaper products. All it takes is some assured long term contracts and some short term hand holding.

The Minister also informed that IKEA had certain reservations about sourcing norms (that companies with over 51 per cent FDI should source at least 30 per cent from small industries in India), which were discussed with the officials of the Department of Industrial Policy and Promotion. He added that “suitable answers” were provided leading to IKEA’s decision to invest.

Official sources said IKEA has filed its application for investment in India in single brand retail, adding that the company has sought Government permission to set up a wholly-owned subsidiary.

IKEA’s investment plans come just ahead of the June 25-26 stock taking meeting in Brussels between India and the European Union on the Free Trade Agreement negotiations. One of the key demands of the EU is that India should give European companies greater retail market access.

Sourcing norm remains a challenge: IKEA

IKEA has agreed to comply with the Government’s norms on local sourcing, but said the rule remains a challenge in the long term.

The norm says that companies with over 51 per cent FDI in single-brand retail should source at least 30 per cent from small industries in India.

In a statement on Friday, the company said, “We will source at least 30 per cent of the purchase value of products sold in India from our direct and indirect supply chain comprising Indian small industries.”

“In the longer term, however, the mandatory sourcing of 30 per cent of the value of goods sold in India from domestic small industries remains a challenge,” it said.

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"India is the only country where all major world religions live together, not only in modern time but over 1,000 years" - His Holiness D A L A I L A M A"What advances a nation or a community is not so much to prop up its weakest and most helpless members, but to lift up the best and the most gifted, so as to make them of the greatest service to the country" - Shri Jamsetji Nusserwanji Tata

The company does not yet have any stores in India but sourced $450 million worth of goods from the country last year, a figure it aims to lift to $1 billion in coming years.
It sources goods such as textiles and carpets from 70 suppliers and 1,400 sub-suppliers in the country, the company said.

Retail investors applying for shares in initial public offers (IPOs) would now be assured of getting allotment of at least a minimum lot.

The Securities and Exchange Board of India (SEBI) on Thursday approved measures that will improve retail investor participation and help enhance market integrity and investor confidence.

“The share allotment system will be modified to ensure that every retail applicant, irrespective of his application size, gets allotted a minimum bid lot, subject to availability of shares in aggregate. The system will satisfy more number of smaller applicants in the oversubscribed issues,” said SEBI.

The minimum application size for all investors has also been increased from existing Rs5,000-7,000 to Rs10,000-15,000.

Prithvi Haldea, chairman and managing director at Prime Database believes these steps will help bring more new retail investors.

“So far, first-time investors used to get only 2-4 shares after all that effort to open demat accounts, fill up forms and block large sums of money. With SEBI now assuring that investors will get at least a minimum lot in oversubscribed IPOs, it will bring a semblance of sanity. Also, raising the minimum application amount is a pragmatic move given that it has been almost 7-8 years since the minimum application size was revised,” he said.

SEBI has also taken steps to reach out to investors across the country.

The nationwide broker network of stock exchanges at more than 1,000 locations will be made available for distributing IPOs in electronic form (e-IPO), in addition to existing channels, said SEBI.

The facility of applications supported by blocked amount, or ASBA, has also been extended to investors coming through the eIPO route so that money leaves the investor’s account only on allotment of shares.

Brokers and issuers would be adequately compensated for promoting the eIPO and ASBA route.

This measure would also reduce the hassles of cheque handling and the processing time taken for manual applications. “These measures will help in bringing down the IPO timeline from 12 days currently to Sebi’s target of T+5 days”, Sebi chairman U K Sinha said. Turn to Page 14

All retail investors to get allotment in IPOs

Sebi has also taken steps to help companies meet the minimum public shareholding requirements prescribed under SCRR, by the desired timeline of June 2013.

“In addition to four existing routes, two additional routes, i.e. rights and bonus issue, will be permitted, wherein the promoters would not be allowed to participate and will only be meant for public,” said Sinha.

Sebi has also brought about reforms to instill investor confidence and ensure a level playing field for all.

“To avoid any misleading signals to retail investors about the extent of subscription in the issue, no withdrawal or lowering the size of bids shall be permitted for non-retail investors at any stage,” said SEBI.

The timeline for publishing the price band, along with relevant financial information, for IPOs has been revised from two working days currently to five days, so that investors get more time to analyse the issue.

Also, to bring more transparency in capital raising, expenditure towards ‘general corporate purposes’ as an object of the issue would not be allowed to exceed 25% of the issue size.

MUMBAI: In Q2 2012, the retail landscape in India was characterized by subdued demand coupled with restrained supply of mall space and largely stable rentals, says a DTZ report.

While continued high inflation levels have restrained consumer spending and delayed purchase decisions, the slowdown in economic growth and weak consumer sentiments have resulted in a sense of uncertainity amongst retailers thereby putting expansion plans on hold.

Subdued demand for retail space also resulted in developers going slow on several underconstruction projects.

As a result, in Q2 2012 the retail markets in India (pertaining to NCR-Delhi, Mumbai and Bengaluru), witnessed a restrained supply of new mall space. Bengaluru was the only city to witness new mall supply, which was recorded at 1.3 million sq ft.

No new supply was witnessed across other key retail hubs, namely Delhi-NCR and Mumbai, in the current quarter. Cummulative vacancy levels across the three major cities was recorded at 9.96% of the total retail mall stock.

Many major brands, spread across Indian and international retailers, plan to set up new stores. However, even as the total planned expansion across these brands amounts to approximately 990 new outlets, just about a quarter of these new developments are expected to be executed in the next 12 months.

The overall retail market sentiments remained largely "tenant favourable" across major cities. Large upcoming supply across most markets coupled with high vacancy rates and restrained take-up levels helped retailers negotiate favourable deals from developers.

Anshul Jain, CEO, DTZ India said, "Even as Indian consumers have exhibited a growing demand for luxury and high end imported brands, the steep depreciation in domestic currency value will adversely impact demand for imported products in the short term. However, most retailers are bullish on the long term growth potential of retail industry in the country. Moreover, the upcoming festive season in the second half of the year is likely to provide some stimuli to the retail landscape in the country."

Many of these retailers are already present in India via licensing and joint-venture partnerships with Indian retailers.

The government has not taken a decision on these proposals, the ministry said in a statement.

Recently an application by Zara owner Inditex S.A. (ITX.MC) to sell a more upscale brand through a joint venture with Tata Group's retail arm, Trent Ltd (TREN.NS), was rejected by the Foreign Investment Promotion Board (FIPB).

In January, India allowed foreign single-brand retailers to set up wholly owned operations in India, but a requirement that companies source 30 percent from small local firms has discouraged retailers from applying for full ownership.

Only Ikea IKEA.UL and Pavers, a British shoe chain, have applied so far hoping to bank in on rising middle-class incomes and an expanding appetite for global brands and lifestyles.

The statement said no decision has been taken on modifying the sourcing norms, a widely expected move from the government as it struggles to attract overseas investors in the sector.

LVMH, the French luxury-goods group that includes Louis Vuitton, TAG Heuer and Moet & Chandon among its brands, plans to aggressively'' catch up with the leading watch rivals, Omega and Rado over the next three to five years, and attain leadership in the country.

The company which has witnessed a steady double-digit growth'' since its foray in India a decade back, plans to double its sales and over the next three years, by focussing on untapped markets'' like Mumbai and other metros, says LVMH Watch & Jewellery India GM, Franck Dardenne, adding that there is no sluggishness in sales due to the economic slowdown, even in Europe which accounts for a third of the company's sales globally.

Tag Heuer which is amongst the top three luxury watch brands globally, has 92 retail points in the country, with seven exclusive boutiques, while Dior has 16 points of sale, and two boutiques.

The company's high-end luxury brand, Zenith was launched two years back and has six retail points at present. Imports of Swiss watches into the country showed a 6% growth during January-June this year, as against the corresponding global figure of 16% for the same period. India is a modest market, with a small share, but is showing a strong growth, he says. Globally, June was exceptional (sales), while July has been slow, he says adding that the slowdown has not impacted the luxury retail market yet, though there are certain pockets like Greece which are not doing well.

Dardenne said that the luxury group is planning to retail Bulgari jewellery in the country soon. "Branded jewelry was heavily taxed and customers thought they could have the same quality asking local jewellers to reproduce some jewels. Long also jewellery was also perceived as an investment only. But things are changing quickly", he says.

Talking about the grey market for luxury retail in the country, he says, "Around 60% of the watches above $5000 are bought by Indians abroad, whether officially or through grey market. We do not believe in its future. Our bet is to sell our products at the same price as abroad, reducing our margins temporarily. This way we expect to clean the market in India and give the customer a wholesome luxury experience."

Janata Dal-United (JD-U) and the CPM have accused Prime Minister Manmohan Singh of using Independence-Day speech to promote the cause of Foreign Direct Investment (FDI) in retail sector.

Both the political parties have termed Singh’s speech from the ramparts of Red Fort as “lacklusture.” JD-U president Sharad Yadav made the allegation through a statement on Thursday. CPM has done the same in an editorial of the forthcoming issue of party mouthpiece - People’s Democracy. Yadav said that the Prime Minister had “admitted that Government could not allow FDI in retail sector due to the non-agreement of the other parties in the Government.”

“It is good that Congress has not got absolute majority, otherwise they would have allowed the FDI in retail sector and destroyed more than 22 crore people engaged in this sector,” Yadav said. “If we see the statistics, the market share of unorganized retail sector is 97 per cent of the total retail sector as compared to organized retail sector which accounts for only 2-3 per cent,” he added.

MUMBAI/PARIS/SINGAPORE, August 06 (Fitch) Fitch Ratings has revised the H212 outlook for the Indian retail sector to negative from stable in view of a sustained deterioration in the discretionary spending ability which is unlikely to improve over the short term.

Fitch has revised down its real GDP forecasts to 6.5% and 7.0% from the earlier 7.5% and 8.0% in FY13 and FY14, respectively. The agency believes that the worsening business conditions could negatively impact credit profiles, while the impact on individual retailers would depend on their ability to manage their capital structures. The Private Final Consumption Expenditure (PFCE) growth rate, which was weakest in the last seven years in H112, is unlikely to improve significantly unless consumer price inflation declines and consumers receive a significant raise in real wages.

The same-store sales growth of retailers has decelerated across lifestyle and value-based formats from Q312. Fitch expects retailers to combat slowing SSG across format (lifestyle and value) by offering discounts which in turn would help boost volumes and consequently overall revenue. However, this may lead to an erosion of gross margins, which retailers may counter by adopting cost-rationalisation measures as seen in the past. Nevertheless, pressures on operating margins are likely to remain, given that a large part of these costs are fixed in nature.

The likely margin contraction, expansion plans, along with increased need for inventory as retailers open up new stores, will increase working capital requirements which will be largely debt funded. However, companies have been implementing various strategies to contain the debt, including raising equity and selling certain non-related assets and business segments, which may help in maintaining credit profiles.

The inventory holding period increased by a marginal extent in H112, with a reduction in the credit period availed from creditors. The expected lower operating profitability as well as higher funding costs and working capital requirements should continue to exert pressure on operating cash flows.

A sustained reduction in consumer price inflation, coupled with a rise in real wages, is likely to restore the discretionary spending power of Indian consumers. This along with an increase in household savings and the associated benign impact of a positive wealth effect on consumer sentiment could change the outlook to stable.

A stable outlook may also result from liberalisation of the multi-brand segment which could provide easier access to foreign direct investment and would have a positive impact on the capital structure and liquidity profile of companies in this sector.

Sahara India Pariwar, an Indian group that owns Grosvenor House hotel in London, will spend 30 billion rupees ($540 million) on retail operations to sell food and household products direct to homes.

The group, based in Lucknow, India, will directly sell products such as flour and detergent through a network of 60,000 distribution centers, Chairman Subrata Roy Sahara said at a press conference in New Delhi today. The centers, to be owned by Sahara and franchisees, will be supplied by 305 warehouses and start operations Aug. 15, he said without elaborating.

Sahara is starting its retail business amid discussions within the government to ease ownership rules for overseas retailers such as Wal-Mart Stores Inc. (WMT) and Carrefour SA (CA) to sell multiple brands. The company’s foray pits it against the local units of Unilever Plc (ULVR), Procter & Gamble Co., Nestle SA and ITC Ltd. (ITC) as they compete to win customers in the world’s second-most populous nation.

“This is a growing business in India,” Roy said. “That’s why all these foreign companies want to come” to India, he said.

Roy didn’t provide a timeframe for the investment.

Sahara will partner with local manufacturers to source the products and sell them under its Q Shop brand, Roy said. The company, which expects its initial 60,000 distribution centers to be operational within 18 months, is targeting annual revenue of as much as 500 billion rupees after the network is in place, he said.

Sahara owns businesses that include television broadcasting, film production and distribution, hotels and mortgage lending. The company purchased Grosvenor House in 2010 and last month bought a stake in New York’s Plaza Hotel.

NEW DELHI: For Ashok Dua, a bank employee, monthly grocery shopping has been restricted to purchasing large size packs from supermarket chains. "It's cheaper to stock up food items from these retail chains, instead of buying items from the local market everyday," says Dua.

Kritika Rao, a "brand conscious" IT professional, has limited her shopping sprees only during the sale period, so much so that Rao has already begun stocking up for the Delhi winters.

As increased prices of products from consumer goods to apparels and accessories are leading consumers to cut down on their monthly budgets, companies and retailers are now focusing on discounts to counter the impact of inflation. While cost absorption would definitely hurt their margins, retailers say the move is worth its salt in a situation where customer retention is of utmost priority.

"One can clearly see that consumers want to stick to certain brands but they are making these purchases only when prices are low as inflation is still high. That is why we are consciously offering various schemes and discounts," said Darshana Shah, business head, marketing and visual merchandise, Hypercity.

Analysts say, with market conditions uncertain, retail chains are desperately seeking out to retain loyal customers, as they focus on the long term picture for growth. Most retail chains are focusing on volume growth to make up for the increase in discounts being offered.

Easyday market stores, owned and operated by Bharti Retail in India, has introduced a new campaign called "freedom from inflation" this year, in a bid to offer consumers a whole basket of products across various categories at low prices. "The campaign will help people fight inflation in these times of rising prices," said Mitchell Slape, chief operating officer, Bharti Retail.

The company, which carried out a survey across India on what is the most pressing problem currently, said 46% of Indians are dissatisfied with high prices. "During times of inflation, customers genuinely recognize great value for money without compromising on quality," Slape said.

Raheja Corporation Group owned chain Hypercity has widened its portfolio of products being sold at discounted price this year. The company has also significantly increased its association with brands that are offering discounted items in the non-food segment.

"Our entire strategy this year is based on how we can excite loyal consumers to make purchases as inflation has certainly softened consumers buying sentiments. It is a tough market for us to go ahead with extensive schemes but in the long run it will benefit both of us," said Shah, of Hypercity.

The hypermarket chain has tied up with ICICI bank to offer cash back offers to consumers to reduce the burden of increased prices, besides introducing combo packs and offering freebies in the food category.

Similarly Future Group owned supermarket chain Big Bazaar and Reliance Retail chains have increased the number of categories on which discounts are being offered. "Consumer sentiments are down, so naturally it impacts us. In non-food categories especially, it is discounts that are doing the trick for us," said Pavan Sarda, chief marketing officer, Future Group.

New Delhi: In the face of apprehensions against FDI in multi-brand retail, Prime Minister's Economic Advisory Council (PMEAC) on Friday suggested that foreign investment in the sector be capped at 49 percent.

The Cabinet on November 24, had decided to allow 51 percent foreign direct investment (FDI) in multi-brand retail.

However, the decision could not be implemented following strong opposition from key UPA constituent Trinamool Congress and several chief ministers.

"Keeping in view the apprehensions against FDI in multi-brand retail, to begin with FDI up to 49 percent may be allowed in this sector," PMEAC, headed by C Rangarajan said, in its 'Economic Outlook for 2012-13'.

It said those states which are receptive to this idea may implement the decision. However, before coming out with the decision, its attractiveness may be ascertained with top international retailers and "it should be operationally so done that the announcement is met with investor announcements in favour of the same...".

The government announcement should be followed immediately by filing of applications, approvals and early kick-off in the states which are in favour of global retailers, it said.

It said that though the quantum of investment that may be forthcoming immediately "may not be large, permitting FDI in retail will help send the right signals on the commitment of the government to take the reform process forward".

PMEAC also called for FDI liberalisation in aviation sector.

The council said that the Indian aviation industry on Friday has established players.

"However, they need infusion of capital and technology to grow to the next level," it said adding foreign airlines should be allowed to pick up 49 percent stake in the domestic players.

Given the current difficulties of the domestic airlines, which have high costs on account of taxation applicable to aviation turbine fuel, maintenance, repair and overhaul, the immediate prospects for revival of the sector may depend on favourable consideration of concession on these by the Finance Ministry, it added.

Currently FDI up to 49 percent by FIIs and other overseas investors is allowed but foreign airlines are barred from investing in the Indian carriers.

MUMBAI, AUG. 17:
Demand for retail space in India remained subdued in the first half of 2012, according to property services firm DTZ-UGL. This was due largely to the controlled supply of mall space and stable rentals.

DTZ-UGL provides retailers with a global, integrated, end-to-end service offering and investor services, property and facilities management. While high inflation has checked consumer spending and delayed purchase decisions, the slowdown in economic growth has resulted in a sense of uncertainty among retailers, putting their expansion plans on hold.

The subdued demand for retail space has also led to developers going slow on several under-construction projects. As a result, the retail markets in NCR-Delhi and Mumbai did not witness any new constructions. Bangalore was the only city to witness new mall supply of 1.3 million square feet.

“Even as Indian consumers have exhibited a growing demand for luxury and high-end imported brands, the steep depreciation in domestic currency value is set to adversely impact demand for imported products in the short term,” said Anshul Jain, CEO, DTZ India.

The three major cities recorded a cumulative vacancy level of 9.96 per cent of the total retail mall stock. Delhi-NCR and Mumbai registered double-digit vacancy levels at approximately 13 per cent and 10 per cent respectively. Bangalore registered the lowest availability level of 3 per cent. This will help retailers negotiate favourable deals from developers, Jain added.

However, most retailers are bullish on the retail industry’s long-term growth potential, said Jain, adding that the upcoming festive season might liven up the retail landscape.

French retailer Auchan has signed a franchise agreement with India's Max Hypermarket to enter the country with its retail operations, the companies said on Monday.

Max, which is run by Dubai-based Landmark Group, operates 13 hypermarkets in India. These stores will be rebranded "Auchan" in the fourth quarter of the current fiscal year ending March 2013.

Max and Auchan plan to open 12-15 new stores annually across India, they said in a joint statement.

Current foreign ownership regulations in India do not allow global hypermarket and supermarket chains such as Wal-Mart Stores Inc and Carrefour SA to set up shop in the country.

In December, the government backtracked on its decision to allow such chains to own 51 percent in India's multi-brand retail sector after a huge political backlash.

Max Hypermarket had a partnership with Dutch food retailer SPAR international BV which ended earlier this year.

Max Hypermarket India Ltd is controlled by retail and hospitality major Landmark Group. Landmark operates hypermarkets under the Max brand only in India and so it is not restricted under foreign ownership regulations.

A day after Maruti Suzuki sacked about a third of the 1,528 permanent workers at its Manesar plant, the Gurgaon-based Maruti Udyog Kamgar Union (Muku) demanded their reinstatement. The demand was supported by about 30 other trade unions affiliated to the All India Trade Union Congress (Aituc) and the Centre of Indian Trade Unions based in the Gurgaon-Manesar belt.

“We have communicated to the management that a full inquiry should be conducted and the proper procedure followed before dismissing workers at Manesar. We have also filed a memorandum before the Haryana government, demanding the reinstatement of all sacked workers and the release of all innocent workers arrested in connection with the violence at Manesar,” said Kuldeep Jhangu, general secretary, MUKU. So far, the Haryana police has arrested 154 workers for the arson at the Manesar facility.

Jhangu said talks with the management had begun and a decision on further action would be taken after gauging the company’s response.
On Friday, about 5,000 workers from about 30 trade unions in the Gurgaon-Manesar belt held a protest rally against the dismissal of workers at Maruti Suzuki’s Manesar plant.

The company has indicated more dismissals are likely. “Our officials injured in the incident on July 18 and others who managed to escape have identified workers involved in the violence. We have lost confidence in them and have issued termination notices to over 500 such employees. It is possible once more people are identified, more notices will be sent,” Maruti Suzuki Chairman R C Bhargava had said yesterday.

The trade unions also demanded a Central Bureau of Investigation probe into the violent standoff between workers and the management at the plant, which had resulted in the death of a senior management executive and left 96 officials injured.

D L Sachdeva, national secretary of the Communist Party of India-backed Aituc, said, “The trade unions had earlier filed a memorandum to the chief minister (of Haryana). If the state administration does not respond even now, the unions would hold a protest before Parliament.”

Yesterday, Maruti Suzuki had said it would lift the month-long lockout and start production with 300 of the remaining 1,000 permanent workers at Manesar on Tuesday, under police protection. The company would manufacture about 150 cars, a tenth of its total capacity. It would also screen the 1,869 contract workers and regularise those deemed “fit” for employment starting September 2. Contract workers would not be employed for production.

With market leader Reebok India involved in an alleged Rs 870-crore fraud case and German sports-goods maker Adidas attempting to clean up the mess there, rival Nike, say market experts, is in a position to capitalise on the vacuum that is there in the Indian market.

The American sports-goods maker, the largest in the world, with 2011 revenues of nearly $21 billion, has trailed Adidas and Reebok in a market it identifies as a key one. Retail industry experts peg Reebok's market share in India at about 50 per cent to Adidas's 20 per cent and Nike's 15 per cent.

But, with Adidas recently announcing that it proposes to cut the number of Reebok stores by a third, Nike, say experts, is likely to seize the opportunity at hand.
Tarun Puri, managing director and general manager, Nike India, says the company, which operates out of Bangalore in India, would continue looking at retail expansion, a multi-channel distribution strategy and consumer-centric products.

Currently, Nike has some 300-400 exclusive stores, according to retail industry sources, in comparison to Adidas' over 650 and Reebok's nearly 900 stores. All Nike stores in India are franchisee outlets. Puri says there are no plans to have a company-owned model of outlets as is the case in many other parts of the world, where the sports-goods maker operates. "We continue to work with our partners and look at ways at how we can expand our footprint," he says.

As part of this strategy, Nike has also been talking to more number of multi-brand outlets (MBOs) of late. In the last few years, Nike has taken its total retail presence, that is, exclusive plus multi-brand outlets to 3,000 from 2,000. Experts say this has been largely driven by the American sports-goods maker's desire to ramp up presence in MBOs. This strategy, they say, is likely to continue as the sports-goods maker looks to drive penetration and reach in India.

The market for sports goods in India is pegged at Rs 3,500 crore growing at a rate of about 18-20 per cent. Most sports-goods makers are banking on greater awareness and health consciousness to drive this category. "If a few years ago, people were content buying any pair of sports shoes. Today, the accent is on specific requirements," says Puri.

Most international brands, especially Nike and Adidas, are focusing on meeting specific consumer needs, which is partly why they are priced at a premium, say industry experts. A Nike pair of shoes, for instance, starts from Rs 2,000 onwards in comparison to Reebok, which is more value-for-money. Reebok has had products priced as low as Rs 999 in its portfolio.

Puri says there are no plans to lower price-points any time soon.

In the last few years, Nike has also attempted to raise its profile on the brand-building front in India using a combination of star endorsements, grass roots-level activities and events besides high-profile advertising. Its popular Bleed Blue campaign, for instance, has helped Nike garner some 1.7 million fans on Facebook. Nike is also the official apparel sponsor for Board Of Control For Cricket In India (BCCI) tournaments. It promotes the Nike Cup in cricket, has associated with Manchester United in football and operates running clubs in Mumbai and Bangalore.

Top management hired for the venture leaves Tata International, new team shuts shops
Noel Tata, the half brother of current chairman Ratan Naval Tata and brother-in-law of chairman designate Cyrus Pallonji Mistry, has scaled back his plans for a massive retail foray at Tata International where he serves as managing director.

The company that had planned to set up a network of 250-300 footwear retail outlets by 2014-15, has instead shut several of them, including its first flagship store opened at the busy Linking Road high street of Mumbai. The top management hired specifically for the business including former Bata hand Deepak Deshpande and his team of senior executives have left the company. A team of 150 people had been hired in 2010 for the retail foray of the flagship international arm of the $83.3 billion Tata group.

As of date, Tata International’s 15-20 stores, that were planned to be up and running by March 2011, are not even operational. When contacted by Financial Chronicle, a Tata International spokesperson in an email response said, “Tata International launched the Tashi brand of footwear stores between October 2010 and June 2011. The company envisaged a launch plan of 15-20 stores in two trial regions – namely Delhi and Mumbai, to test market the concept. Based on the results of these trial stores, it was felt that changes were necessary in store location and product pricing strategy. A new management team has been put in place to make these changes.”

FC learns that the new management team, headed by Tashi’s erstwhile chief merchandise officer, has taken the painful decision to close several loss-making stores and also take a hard look at its merchandise and the price points offered.

Noel Tata, the prime mover behind the success of Trent, is widely credited with making it a successful and profitable retailer with a cautious expansion based on in-house private label brands. A widely respected leader in India’s organised retail industry, he also managed to create a successful tie-up between Star India Bazaar and British retail giant Tesco. “I am surprised that Tatas have not been able to perform as the footwear market is doing quite well. Consumers do take little time to warm up to a new brand something the Tatas know well. The only plausible reason for the scale back could be that the original team went berserk with the expansion,” said Harminder Sahni, managing director at Wazir Advisors, a retail consultancy firm.

“While Tashi was initially launched as a high end brand from the house of Tatas it’s quality was not in keeping with the premium pricing. This had a knock on effect on the brand equity of the franchise and the group as well which may have prompted a rethink on the merchandise mix and pricing strategy,” said Harkirat Singh, managing director at Woodland. At a recent sale in monsoon months, Tashi’s sole Mumbai store in the western suburb of Andheri had items being sold for a flat Rs 500.

The CEO of another leading retail chain said that the collection at Tashi was not geared adequately for the Indian market as it lacks the range and breadth that some of its major competitors offer. Tashi originally aimed to sell footwear and accessories to young upwardly mobile consumers aged between their 20s-40s. However, the absence of well-known brands in store and high prices puts off most of the target audience.

At the time of its launch in October 2010, Tashi’s women’s footwear range was priced between Rs 700-4,700, the men’s footwear range between Rs 600 and Rs 7,000, a kids’ range between Rs 500-1,500. The company now has just two stores in Western India and the remaining stores in North India. “They are also operating through a shop in shop format at Westside stores,” said Singh.

“The brand will continue to operate in these two markets (Delhi and Mumbai) with eight operational stores and through shop-in-shop stores including Westside, while evaluating the relevance of the changes in strategy,” said the spokesperson in the email response.

Tashi was the second major attempt by the Tatas after its endeavour to enter the shoe retail business under the Stryde brand and leveraging German shoe brand Ornig it had acquired in 2001. That foray, which aimed to capture an 11 per cent share of the organised market in three years from launch, based largely on a franchisee led growth model, ended in failure. Other large firms such as Larsen & Toubro and Hindustan Unilever were engaged in the footwear business in the past too, but failed to make a dent in the domestic market.

“What’s different this time is the team we have put together comprising of experienced retailers in shoe retailing rather than a team who has a lot of experience in shoe production or other businesses with limited or no experience of retail. We have also taken time in evaluating the business case and taken on board the Tata group’s experience in the retail business to delineate the customer group we want to target and the kind of product assortment we need to attract them,” Deshpande had told FC in 2010.

Retail outlets displaying ‘Sale’ signs almost throughout the year on the one hand, and the growing number of modern retail outlets on the other across India, point to a mixed bag. While the number of modern retail outlets continues to grow, several retailers have had to revisit their strategies.

“Most retailers expanded aggressively and are now in the phase where they are downsizing and rightsizing. While rightsizing has been taking place over the last few years, it has picked up pace now,” said Arvind Singhal, chairman, Technopak Advisors. “Modern retail in India has not taken off the way it was anticipated. Both internal and external factors contribute to this. The government is to blame for lack of policy measures including goods and services taxes, and foreign direct investment.”

“The modern retail rollout plan was mostly executed over 2006-09. Post rollout, most players are consolidating their positions, focusing on how to make money,” said Mohit Bahl, partner, KPMG Transaction Services. “The footfalls are happening in pockets. The struggle is especially in the premium and super premium segments. In food and grocery retailing, there was an excessive rollout with no back-end in place; retailers are now rationalising the business.”

Supermarket and convenience store statistics from 2004-05 onwards indicate a shrinking in modern retail store numbers, once consolidation started. According to KPMG, the supermarket strength has shrunk from 4,599 stores in 2008-09 to 2,989 today. The major exodus came in 2008-09 and again in 2009-10 when the number of stores shrank by 38%, when Subhikhsa and others closed. The next year too remained flat, before a marginal rise in 2011-12.

Persisting inflation and an uncertain economic scenario has made the consumer cautious, dampening modern retail growth.

“There is a huge supply of retail space across India but there is a clear mismatch in terms of footfalls. So retailers are taking a conservative approach and show no hurry in signing new deals,” said Pankaj Renjhen, MD - retail services, Jones Lang LaSalle India.

“The new age retail saw a sudden boom and gradually slowed down. Recession came heavy on the retailers and soaring real estate prices increased the dent further, putting pressure to raise product prices. Also government policies are not very conducive for modern day trade,” said Ram Chander Agarwal, the man who built Vishal Retail and then sold it off post-liquidation last year for Rs. 70 crore. He now heads V2 Retail, a value format apparel chain.

The Indian consumer is displaying two behaviour patterns on retail: need-based shopping – best addressed by the neighbourhood kirana stores – and trading up for newer, more expensive, sophisticated products – addressed by modern retail. A Nielsen study found that over one-third of sales of products such as breakfast cereals, packaged rice, liquid soaps, floor cleaners, air fresheners and the like are coming from modern retail. Cosmetics, personal care and other FMCG products are upbeat on modern retail for growth.

Nielsen’s study showed that while nationally, modern retail grew 28% in 2011, it grew up to 40% in some tier II cities. The industry sees this trend strengthening in tier II and III markets. Modern retail will grow in India, but it will not necessarily be a smooth ride.

“With more international players and investments in the back-end and supply chain operations, the sector will see significant transformation in the future,” said Agarwal.